Posts Tagged ‘David Cote’

Global controversy mounted over the Federal Reserve’s decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism.

The Fed’s decision to buy $600 billion in U.S. Treasury bonds and therefore flood the financial system with money after last year’s stimulus is an inherently inflationary measure.

Why should we be alarmed?

Recently, Dave Cote, CEO of Honeywell, gave a speech to the Chamber of Commerce that you should read and watch:

For instance, the discussion about China’s defense expenditures being paid for by our interest payments. Cotes points out that if spending remains unchanged through 2020, we’ll be paying almost a trillion dollars in interest a year. At this point, foreign governments own 45% of our 9 trillion in debt. China owns at least a trillion of it. And there’s no end in sight of the sale of government debt here.

The last point Cote makes that echoes Dales warning is about how quickly this will happen if we don’t do something.

While the problem builds slowly and inexorably, financial markets respond abruptly. When that decline does happen, it won’t be a case of minor monthly changes that give us 15 months to adjust. The hurt will come overnight as the herd moves against us. And then it’s too late.

That could happen at any time without warning triggered, as Dale points out, by some seemingly insignificant occurrence that normally would receive only passing attention. I don’t think, for the most part, people understand that very important point or they’d be beating down the doors of Congress.